A long-running effort to protect Alaskans from predatory payday loan schemes, some of which charge annual interest rates exceeding 500%, cleared the Alaska Legislature in its closing days, but not before Republicans cried foul.
Senate Bill 39 imposes a 36% cap on interest rates for all loans under $25,000. Previously, the state had a carveout that allowed lenders to charge unlimited interest rates on loans of $500 or less. The measure was sponsored by Anchorage Democrats Sen. Forrest Dunbar and Rep. Ted Eischeid.
“The people who are on the ground working know that the folks who take these loans end up worse-off in the long run than having not taken it,” Dunbar said during the floor debate on May 20, referencing a study that found taking a payday loan greatly increases the chances someone will file for bankruptcy.
The nonprofit Alaska Public Interest Research Group has been advocating for the limits for years. Research by AKPIRG estimates that some 15,000 Alaskans take out a payday loan each year. While the loans are intended to be short-term, with an interest rate charged weekly (usually about 15%, which adds up to more than 500% annually), advocates argue it’s easy to fall behind. The average payday loan borrower in Alaska will take out five such loans a year, the research found, often to pay off a previous one.
“The Alaska Legislature is ending a debt trap that has harmed communities for over two decades,” said Claire Estelle Lubke, AKPIRG Economic Justice Lead, in a statement. “By requiring payday lenders to comply with a 36% rate cap, Alaskans are free to seek out better options for low-barrier credit. Whether it’s small-dollar loans from banks or credit unions, responsible fintech products, or support from community-based programs, Alaskans deserve options that foster financial stability, not compounding hardship.”
AKPIRG partnered with the Mutual Aid Network of Anchorage in 2023 to launch a project to forgive payday loans, and is still collecting money for that effort. Other groups, including the Food Bank of Alaska, Alaska Children’s Trust, AARP and YWCA Alaska, backed the bill.
“YWCA Alaska supports payday lending reform (SB 39) because predatory lending behavior is detrimental to our community and directly impacts our most vulnerable community members. By reforming the process, we’re helping those who are most desperate as well as improving our community as a whole,” said Jessie Lavoie, CEO of YWCA Alaska, in a statement.
Many advocates said there are other, less predatory ways for people to obtain fast, small-dollar loans, such as online lenders and local banks that operate under 36% interest rates. The move comes as personal debt has continued to rise in the country, recently hitting a record of $18.2 trillion, a sign of broader economic struggles.
But Republicans saw it differently.
In both the House and the Senate, conservative Dunleavy-aligned Republicans were broadly opposed to the measure. This is a particularly notable turn because just a year ago, when a similar measure was sponsored by a now-former Republican legislator, it had garnered broad bipartisan support.
On the House floor, right-wing Eagle River Republican Rep. Jamie Allard argued that limiting predatory payday loans would infringe on people’s freedom to take predatory payday loans.
“This is government overreach. Individuals should be able to take loans as they wish at whatever percentage rate. This will impact individuals who can’t otherwise get loans; they need to be able to access the funds in smaller amounts of loans, but this is prohibiting them from doing it,” she said. “This will limit their access to that.”
Allard also took issue with the backers’ arguments that the measure would protect military members. The legislation is intended to mirror the Military Lending Act, which caps loan rates at 36% for military service personnel.
“I’m tired of the military being used as a platform to further certain bills,” she said. “Frankly, we are veterans; we can make our own decisions as we need to.”
Following the vote, Dunbar, who is an active member of the Alaska Army National Guard, said he found the split on the vote an “interesting natural experiment in partisanship.”
“Every incumbent Republican in the House who voted against this bill this year, when it was carried by a Democrat, voted for it last year, when it was carried by a Republican,” he said. “In contrast, every incumbent House Democrat who voted for it this year also voted for it last year because it’s good policy.”
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Bluesky.
